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Saturday, December 8, 2012

According to a report released yesterday by the Bureau of Labor Statistics (BLS), there were approximately 146,000 jobs added in the U.S. in November and the unemployment rate dropped to 7.7 percent, which would be the lowest since 2008. The report is based on a survey of households and employers, and does not accurately depict the reality of the jobless rate in the U.S. today.

The 7.7 percent rate is the government’s most widely publicized unemployment rate, known as the U-3, which takes into account only those who are collecting unemployment benefits and actively looking for work. It does not take into account those whose unemployment benefits have run out, those who have given up seeking work, those who are underemployed – desiring full time work but forced to work part time, or those who have dropped out of the labor force more than 12 months ago.

There is also a factor in the calculations known as “seasonal adjustments.” The BLS uses a software program known as X-12 ARIMA, a complex modeling algorithm, to factor in seasonal adjustments to the jobs reports. As with any software program, the results are only as good as what the data input is and the results are easily manipulated. Job growth reports from the BLS have a 100,000 jobs margin of error on a monthly basis, but outside of that margin they are 90 percent accurate.

In fact, the numbers in the reports are regularly (and quietly) revised each month. Last month’s jobs report suggested that the economy had added 148,000 jobs in September and 171,000 jobs in October. That has now been revised downward to 132,000 and 138,000, respectively.

According to the BLS report, 53,000 of the 146,000 jobs added in November were in the retail sector. That would obviously factor in as a seasonal adjustment, because most of those jobs will disappear after the holiday season. Combining that with the potential for a 100,000 job margin of error could mean job losses and a rise in the real unemployment rate last month. It is also difficult to factor in anomalies like the amount of people temporarily out of work due to Hurricane Sandy during the survey week, although the BLS reported that the effects of that were minimal.

Brad Plumer, writing for the Washington Post, explains the potential for discrepancy:

The discrepancy…has to do with what’s known as “seasonal adjustments.” The U.S. economy follows certain predictable patterns in hiring and layoffs every year. School districts always let workers go for the summer and hire in the fall. Retailers always staff up for the Christmas holidays and lay people off afterwards. Students always flood the labor market in June. And this is exactly what BLS does in its monthly jobs reports.

The BLS report releases the highly publicized U-3 unemployment rate along with a lesser known rate called the U-6. There are, in fact, six different scales of unemployment known as “alternative measures of labor underutilization,” that are numbered U-1 through U-6. The U-6 rate is the most inclusive gauge of the statistical unemployment rate in the U.S. because it takes into account “total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force.”

Another BLS report shows, for example, that the official U-6 unemployment rate for the state of Wisconsin is 13 percent. Nevada's U-6 rate is 21.4 percent, up from just 7.6 percent in 2007. Washington State is at 17.1 percent. Economically troubled California has a 19.6 percent real rate, while Rhode Island is at 18.3 percent, more than double its 8.3 percent rate in 2007. Only four states, Nebraska, North Dakota, South Dakota and Oklahoma have a U-6 rate that is under 10 percent.

ndeed, many have already pointed out that the lower unemployment rate has more to do with people dropping off the unemployment rolls and out of the labor force than with job creation, as evidenced by a reduction in the numbers reported in the labor force. See here, here and here.

Even the U-6 rate, however, does not accurately measure the true amount of eligible workers who are out of work.

The key words in that report are “marginally attached.” Persons marginally attached to the labor force are described as those who currently are neither working nor looking for work but indicate that they want to work, are available for a job and have looked for work sometime in the past 12 months. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work.

Many Americans have given up on the job market and have not looked for work in the past 12 months. Many do not have a phone or mailing address through which to respond to a household survey. There is no way to count all of the unemployed in America who are no longer “marginally attached” to the labor force and according to some estimates that number is staggering.

These people have been called by CNN “The 86 million invisible unemployed” and that, taken together with some simple math, shows that the true jobless rate in the U.S. is far higher than 7.7 percent.

The total U.S. population is approximately 330 million. 24 percent of those, however, are young people not eligible to work and 13 percent are retired. So the total pool of available workers in the United States is 100% - (24% + 13%) = 63% of 330 million people, or about 208 million workers. The U.S. government officially admits that 7.7 percent of the labor force is “visibly” unemployed, which accounts for about 16 million people. Together with the “invisible” that means about 102 million Americans are available to work but do not have a full time job. And with 102 million out of 208 million available workers not working, the true jobless rate in the US right now is closer to 49 percent, not the 7.7 percent the U.S. government and corporate media is propagandizing about.

That calculation is consistent with a recent survey of income and program participation (SIPP) conducted by the U.S. Census Bureau that shows that well over 100 million Americans are enrolled in at least one welfare program run by the federal government. And that figure does not even include Social Security and Medicare.

The implications for the U.S. economy should be obvious. Government benefits for the unemployed merely provide enough for families to get by and cover basic living expenses. They leave no room for the type of discretionary spending that keeps businesses thriving in America. The amount of citizens out of work, not contributing revenue and receiving benefits, combined with billions in defense and war spending, bank bailouts, tax breaks for huge corporations that outsource jobs, etc., is simply unsustainable.

The only solution to the economic downturn in the U.S. is to bring back or create well-paying jobs in the U.S. Even though seasonal retail jobs that pay less than $10 per hour make good headlines in reports, they are not the solution.

Gregory Patin writes for the Examiner where this article first appeared. Patlin earned a B.A. in political science from U.W. - Madison and a M.S. in management from Colorado Technical University. He is currently a freelance writer residing in Madison, WI who considers himself politically independent.

14 comments:

Anonymous
said...

Bringing back or creating well-paying jobs in the U.S is not the only solution. 1.3 billion rounds of hollow-point ammunition bought for DOMESTIC use by Homeland Security might mean that our "government" is planning to reduce the workforce to balance with available jobs.

"A crazy idea!" you say? No more crazy than outlawing natural food, telling the world that the laws of physics don't apply to what happened on 9-11 or running up more debt to solve the problem of too much debt!

Only a really stupid people could believe what we're being told to us or fail to see what's being planned for us.

The BLS unemployment report does not lie that it is not counting the discouraged workers, etc.

But those, such as this author and Dr. Roberts, who are making the case that government is cooking the books to hide the truth also ignore one important fact, which guarantees that the number of workers leaving the workforce will be greater than those entering it: the inflated size of the aptly named boomer generation.

Each year, 4 million or more are reaching 65 and while many must continue to work, most are retiring and thus leaving the workforce. Those seeking to exaggerate the unemployment picture ignore this fact, which insures that for years to come, the numbers leaving the workforce (of whom 3 million or more each year for the next few decades are NOT discouraged workers but retiring boomers).

Therefore, the number leaving the workforce, not due to discouragement, is greater than those entering. That guarantees that so long as any positive job growth exists ( 1 1/2 million new jobs in 2012), the unemployment rate will fall.

In 20 years, when 90% of the boomers are dead and gone, the next generation of retirees will be much smaller and so both the cost and the ratio of workers/retirees will be reduced without any legislation at all. We boomers, the most educated and best-paid and taxed generation in our history, have stored up 2.7 trillion to see Social Security thru to the day when the roles are sharply reduced by the natural causes.

Those doing the fear-mongering, claiming the govt is lying to hide the truth, etc. are ignoring these indisputable facts, which make the problem of unemployment, a real problem indeed, much worse than it actually is. The only intention of such fear-mongering exaggeration is to justify the case for privatizing SS and Medicare, if they are bankrupt. In fact, they are not.

I believe the govt should use deficit spending, as during WWII, to create full employment, which history shows more than pays for the original investment. After massive govt spending and debt, much greater than today during WWII, the US enjoyed not the economic ruin predicted by the Republicans but 30 years of shared prosperity with rising wages, profits, and economic growth.

Reagan ended all that and the median wage since has fallen over 30%. The real scandal about unemployment is not that the govt is lying (it does not pretend its data includes discouraged workers) but that Republicans have both blocked a more robust recovery by diluting stimulus and has, on many levels, slashed public sector jobs by 750,000, in order to keep unemployment high enough to blame on Obama and thus defeat him.

That strategy failed and it is time to recognize who is blocking the creation of more jobs and full employment. It is the same fiscal conservatives who under REagan tripled the debt and under Bush II more than doubled the debt and lost 8 million jobs in the 2008-9 recession, who have worked to prevent a robust, adequatelly funded recovery with a goal of full employment, which not only reduces govt costs but increases revenue (down 20% as a result of the Bush recession).

It's time to come clean and admit that the unemployment problem is the deliberately engineered result of Republican policies, with the underlying goal of reducing wages and creating the illusion of SS and Medicare being bankrupt in order to hand over their trillions to Wall St.

The gov't manipulates the unemployment rates to appease the stock market dummies. They have found that, when their manufactured rate is low, investors spend more, if they advertise a high rate of unemployment, investors tend to hold back. This gov't will never tell the truth as they are so used to telling lies, it is their norm. 33 of the 100 Senate seats were up for election - 10 retired, 23 were reelected. All 435 House seats were on the ballots - 40 retired, 353 were reelected, 5 were lost due to redistricting, 37 were reappointed. These are unacceptable numbers in order to take our government back. These are the gangs of thieves we had the chance to fire and we didn't. All because ignorant sheep believed the wolf would never come to their door. I blindly had faith in the people of this country to vote for a Republic, not a welfare state. I am a college graduate with several years experience in inventory control and finally got a job...driving cars 15 hrs/wk for $7.25/hr. 30 miles away, 300 Mexicans work work in the warehouse I worked in for 7 1/2 yrs. I applied for a seasonal job there and didn't even get a "thanks, but no thanks" letter. If we send those illegal and visa immigrants back NOW, this unemployment rate would be more accurate & people like me could be working a descent job and paying income taxes.

Govenment lying....yes...government trolls tothe contrary, we have a fine example in thesevery comments, your "leaders" will lie to youat the drop of the hat. I have seen for several years in my professionthat the levels of unemployment are radically higher then the phoney "official" numbers

The greedy commercialist that are in collusion with the political hacks do not want the true unemployment figures out because it will cause a panik and the consummers to tighten up on their pocket books and effect these corporate retail box stores cash flow. It's like dash and grab. They are trying to get as much money as they can before the bottom drops out. The reason that the true unemployment figures is hight is because the jobs that were paying a living wage were out-sourced off shore. You can not create wealth with a service and information economy with jobs that pay just over the minimum wage, many of which are part time with no benefits, and a bloated bureucracy with a bunch bureucrats running around scratching their rear ends. The final death stroke to the economy will be when the derivitives bubble burst. The Elite Globalist Banking CABAL of the NWO have their assets in off shore banks in the Kaman Islands. They are insulated. The capital is going off-shore and not being reinvested in the U.S. All that is left is a vacuum. Your political leaders have sold you out. They are in partnership with the elite bankers and industrialist. It's called a CABAL! Their agenda is to shear the sheep. The debt surf slaves will have no other reason to exist, except from the crumbs they fling from their table.

Anonymous,You have to look at the entire picture or the whole scenario. In military strategy it is called attacking your enemy, which is considered by the elite politicians, bankers and industrialist as the middle class working stiffs on the forward and rear flank. The manufacturing jobs are being out-sourced off-shore by slave labor or indentured servants and the borders are wide open to illegal imigrants which work for low wages and compete with Americans for the few jobs that exist. These people that are coming from all over the world are also victims of the economic system. What needs to be done is to change the U.S. immigration policy by having stricter immigration laws. Our neighbor Canada has some of the most strict immigration laws in the world. If you wan't to immigrate to Canada you must apply for landed imigrant status out-side the country, which requires that you have a sponsor, a job that is a hard to fill position and so much money in the bank before entering Canada so you don't wind up on their well-fare rolls. The U.S. has a much too liberal immigration policy.

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